In any industry, managing stock and inventory effectively goes beyond just focusing on stock levels and order fulfilment. While these aspects are important, they don’t provide the full picture of how well your business is managing its inventory to support operational efficiency and profitability.
To gain a more comprehensive understanding of your stock management, it’s important to track non-financial key performance indicators (KPIs) that reflect inventory turnover, order accuracy, and supply chain efficiency. Non-financial KPIs can offer early insights into potential issues with stock management, such as excess inventory, stockouts, or inefficient ordering processes. By closely monitoring these indicators, you can identify areas where stock management strategies may need adjustment and ensure that your business maintains optimal inventory levels, reduces costs, and enhances customer satisfaction.
Below, we outline the most critical non-financial KPIs your business could track to better manage stock and inventory. By focusing on these key metrics, you can ensure that your stock management initiatives are effective, enabling you to create a streamlined inventory process that contributes to the long-term success of your business
Definition: The rate at which inventory is sold and replaced over a specific period.
Importance: A high inventory turnover ratio indicates efficient inventory management, ensuring that stock is moving quickly and not tying up capital unnecessarily.
Definition: The frequency at which inventory items are out of stock and unavailable to meet customer demand.
Importance: Monitoring stockout rates helps identify potential issues in the supply chain or forecasting process, ensuring that customer demand is consistently met.
Definition: The percentage of orders that are fulfilled accurately without errors in quantity, product type, or delivery.
Importance: High order accuracy reduces returns and increases customer satisfaction, contributing to a more efficient and reliable inventory management process.
Definition: The time it takes from ordering inventory to receiving it from suppliers.
Importance: Shorter lead times can reduce the need for high safety stock levels, improving cash flow and reducing holding costs.
Definition: The percentage of inventory that has not been sold or used over a specified period and is unlikely to be sold in the future.
Importance: Reducing dead stock helps minimise losses from unsellable inventory, freeing up storage space and capital for more profitable items.
Definition: The total cost of holding inventory, including storage, insurance, and opportunity costs.
Importance: Understanding carrying costs allows for better inventory management decisions, ensuring that inventory levels are balanced to minimise expenses.
Definition: The consistency and dependability of suppliers in delivering orders on time and in full.
Importance: High supplier reliability supports smooth inventory management and reduces the risk of stockouts or delays in production.
Definition: The average time it takes to complete the entire order process, from placing an order to receiving goods.
Importance: Monitoring order cycle time helps identify inefficiencies in the ordering process and can lead to faster inventory replenishment.
Definition: The accuracy of inventory records compared to the actual physical inventory on hand.
Importance: High inventory accuracy ensures that the inventory management system reflects real stock levels, reducing the risk of stockouts or overstocking.
Definition: The percentage of inventory items that are returned by customers.
Importance: A low return rate indicates that products meet customer expectations, reducing the need for reverse logistics and associated costs.
As with all KPIs and goals in general, ‘less is more,’ so it’s essential to select the handful of KPIs that are most critical for tracking and managing stock/inventory at the top management level. Further down the organisation, more granular KPIs may be better suited for middle or junior-level management and team members. The list of KPIs below is not exhaustive; it is intended to guide you in selecting those most relevant to your unique business circumstances.
For a much more comprehensive list of Key Performance Indicators for managing Stock / Inventory, Work in Progress and much more, please click the link below.
Click Here for a More KPI’s for Managing Stock-Inventory, Work in Progress, and Much More
In summary: By regularly tracking these non-financial KPIs, your business can gain a comprehensive understanding of how effectively it is managing stock and inventory. These insights will enable you to make informed decisions that optimise inventory levels, reduce costs, and contribute to the long-term success of your business.
Note: We are not advocating that you include ALL of the above KPIs on your website, you should select those you feel are most appropriate and enclose a link to a pdf that requires the site visitor to provide their email address to access a more complete list, that then gives them the full list above.
Another consideration: You do need to ensure anyone in your organisation that may end up talking to clients knows enough about the KPIs listed to be able to talk knowledgably about them to provide clients with a consistent, reassuring and professional experience.
